Hargreaves lifted as power stations increase coal use

HARGREAVES Services yesterday revealed that strong demand from power stations was boosting the performance of its coal operations.

The company, which is one the UK’s biggest suppliers of solid fuels, said that it was trading in line with management’s expectations, and is well placed to deliver a good second half performance.

The company delivered a trading update, ahead of the announcement of the results for the six months ended November 30.

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While there have been delays re-starting a number of its newly acquired Scottish sites, the group announced that six sites are now operating.

Hargreaves said there was the prospect of starting work on two further sites in the next few weeks, which will bring activities in line with plan.

Earlier this month, the business and assets of Hatfield Colliery were sold to Hatfield Colliery Partnership, a company ultimately owned and controlled by an employee benefit trust.

Earlier this year, Hargreaves closed Maltby Colliery, near Rotherham, after more than 100 years of mining.

The statement added: “The closure programme at Maltby is progressing in line with plan, with the mine shafts expected to have been filled and capped by the end of the financial year as part of Maltby’s overall restoration programme.

“UK bulk coal operations continue to perform ahead of management expectations, benefitting from strong demand from power stations.

“Volumes are further underpinned by sales of coking coal and PCI coal into the steel sector. We expect these trends to continue and contribute to a strong second half.

“Our UK speciality coal operations are also performing well, and continue to successfully mitigate the loss of supplies as a result of the administration of UK Coal.

“In Germany, challenging steel markets have depressed coke volumes and margins in the first half of the year. While the outlook for coke demand and coke prices remains uncertain, existing contract positions and potential contract awards provide us with some confidence that the German operation will enjoy a strong second half.”

Hargreaves said that although risks continued around coke markets, the group is pleased with the strong performance in coal trading and the progress in its surface mining opera- tions.

The statement added: “The board considers that the group is well placed going into the second half of the year, and is optimistic of achieving its targets for the full year.”

Analysts from N+1 Singer said: “Following a period of significant activity in 2013 which has transformed the risk profile of the group, it is reassuring that trading has been in line with expectations in the first half of the year to May 2014.”

A note from WH Ireland said: “We retain our ‘Buy’ recommendation and see good potential for a further asset purchase in open-cast mining to round off the two which have already been accomplished.”

The group expects to announce its interim results on February 11, 2014.

In September, Durham-based Hargreaves said pressure on power plants to cut emissions, and the high cost of renewable energy, were likely to push up prices for households and businesses.

The group said price rises and a power generation squeeze could force politicians to reconsider coal as an alternative fuel.